China's automotive industry has produced two big brothers with the character "Fu", one Wang Chuanfu and one Li Shufu, and the experience of these two big men in the capital market in the past year can be described as a double heaven of ice and fire.
Wang Chuanfu's BYD has been soaring, the stock price has soared by 500% in more than a year, and the current market value is equivalent to 3.5 SAIC Group, in addition, the divested "BYD Semiconductor" is about to land on the science and technology innovation board, and the blade battery is also expected to break into the Tesla supply chain, and good things are one after another.
In contrast, the "independent brother" Geely Automobile is somewhat water-reversed, originally planning to merge the brother Volvo, and then hand in hand back to the science and technology innovation board to obtain a higher valuation. But Volvo went through a lot of twists and turns, and it was only launched in Sweden in October.
In the case of the new energy sector being chased, Geely Automobile is cold in the capital market.
This must not be blamed on Li Shufu's failure to do things, on the contrary, in the past year, Geely has held no less than ten press conferences, and the circle of friends is also very luxurious.
In the first month of the year, Geely made three big news: the establishment of a joint venture with Baidu Foxconn, the cooperation between Tencent's digital cockpit and autonomous driving, and the discussion of the possibility of OEM with Jia Yueting's FF.
Two months after the release of The Krypton 001, it was announced that the deliverable capacity within the year was sold out; in September, Li Shufu engaged in "reverse crossover" and announced his entry into the mobile phone field.
But no matter how loud the gongs and drums of Geely are, the capital market is not moved. In the most eye-catching field of intelligent electrification, Geely shouted out "5 years to invest 150 billion yuan for research and development", "2025 to achieve 3.65 million sales targets, of which new energy accounted for 30%, if you add krypton, the proportion will increase to more than 40%", the stock price fell instead.
For Geely, this article will mainly answer the following questions:
1. Why is the capital market so cold to Geely?
2. Why does Geely have to do pure electric architecture?
3. What does geely's new product cycle mean?
Capital logic switching
Before 2018, capital evaluated OEMs to look at only one factor: volume and price rose together.
From 2016 to 2018, Geely's sales increased from 800,000 units to 1.5 million units, the market share of passenger cars rose from 3.2% to 5.8%, and the average price of bicycles (including Lynk & Co) increased by 9,500 yuan.
A wave of stock price rises, pushing Geely to the position of "independent brother".
With the negative growth of China's auto market for three consecutive years after 2018, the industry has entered the era of stock.
Increasingly fierce competition means that the profitability of car companies has declined, Geely's bicycle profit has slipped from the highest 0.9 million yuan in 2018 to 0.4 million yuan in 2020, SAIC's autonomy (including Roewe, MG, etc.) has been even worse, and the bicycle profit has fallen from negative 0.5 million yuan to negative 11,000 yuan.
At the same time, Tesla's multi-quarter earnings have changed capital's assessment of OEMs. In addition to the rise in volume and price, there is more of the factor of electrification transformation. In both dimensions, Gilly is not flattering.
From the perspective of volume price, geely's average bicycle price has only risen by 1,000 yuan from 2018 to 2020, because Emgrand, Vision, and Boyue are the main sales forces of the old platform.
In contrast, under the pull of high-end series such as tanks, WEY and guns, the average price of bicycles increased by more than 6,000 yuan in the same period.
In terms of total, Geely's sales have been declining in the past two years, selling 1.03 million vehicles in the first ten months, and according to the annual target of 100,000 per month, it is less likely to complete the annual target of 1.53 million.
In the dimension of new energy, Geely got up early and rushed to a late set.
As early as 2015, Li Shufu announced the "Blue Geely Action" in a high profile, saying that in 2020, the sales of new energy vehicles would account for more than 90% of Geely's overall sales.
In fact, Geely's new energy vehicle sales have never accounted for more than 10%, and only 4.8% in the first half of this year.
Perhaps to boost morale, Li Shufu said of the failure of the plan: "This is not the wrong strategic direction, nor the failure of strategic implementation, but the historical timing is not ripe, and external strategic conditions have not been formed." He added that "examples of such failures abound" and that "we don't have to be frustrated about it".
The reality is a little harsher than Li Shufu's words. The sluggish sales volume is not all external, it also reflects Geely's lag in technology development and the lack of voice in the industrial chain.
The three most critical components of electric vehicles are batteries, motors and electronic controls, batteries account for 30%-40% of the cost of the vehicle, and motors and electronic controls account for about 20%;
In the research and development of the three electrics, BYD is the most complete layout of domestic independent car companies, with Fordy batteries and Fordy power, launched blade batteries last year, followed by the Great Wall, which has Hive Energy and Hive Easy Creation.
Geely has also considered self-developed batteries, and has tried to support "Hengyuan" to ensure future supply, but it is not successful, and currently mainly relies on external companies such as Ningde Times, Sunwoda, Fu Neng Technology, etc., and because new energy sales have not improved much, it is impossible to form enough discourse power on the upstream like Tesla.
To sum up, it cannot meet the old logic of rising volume and price, and it cannot keep up with new energy, so that Geely is no longer in the capital market.
However, new energy is unfavorable, affecting not only the capital market. Under the "double integration" policy, new energy has become a hard indicator.
Double credit is a policy introduced for energy conservation and emission reduction, and the indicator is composed of "average fuel consumption credit + new energy vehicle credit". If the indicator is negative, OEMs need to suspend the production of some high-fuel consumption products. If you do not want to reduce/stop production, the negative score enterprise needs to purchase points from the positive enterprise.
The rumor that the "generation of god cars" fell into the suspension of production is related to the double points. Although some insiders say that Santana has not officially stopped production, Santana's drag on points is a fact - each car produces about 0.4 points, and for each production, SAIC Volkswagen will have to pay a fine of about 2,000 yuan [2].
According to data from the Ministry of Industry and Information Technology, the companies with the most positive points in 2020 are Tesla and BYD. The total negative points of "Zhejiang Haoqing" and "Zhejiang Geely", which belong to Geely Holdings, total 1.473 million points, considering the previous accumulation, Geely is expected to still have a negative point gap of 300,000 this year.
If the average transaction price of 2600 yuan this year is followed, Geely needs to pay about 800 million yuan for this.
In response to the problem of double integration, Geely mainly adopts three methods.
The first is to reduce production or discontinue production of product lines that are not profitable, such as vision;
The second is to launch more low-end products based on "oil to electricity", sink to the third and fourth-tier markets, do not seek to make money, only try to integrate;
But the most important thing is to introduce a new pure electric architecture and hybrid system.
The pure electric offensive is long overdue
For pure electric offensives, different car companies have different choices.
In the early days of the new forces, because of the small amount of funds, tight time and limited resources, they often choose the "single product strategy", and the models incubated by the same platform are very limited, only two or three models, such as Model 3 and Model Y, Weilai ES8 and ES6, Xiaopeng G3 and P5 are all from the same platform.
However, for traditional large factories, due to the advantages of capital, technology and volume, pure electric architecture with more prominent scale effect is often selected.
In September last year, Geely launched the SEA Haohan architecture, and in January this year, Baidu announced that it would start the road to car manufacturing based on the SEA architecture, which caused a lot of heated discussion in the capital market;
After all, the pure electric platform developed for electrification transformation has many advantages, and Geely can further dilute the cost of research and development through technology output.
At the product level, the pure electric architecture can achieve improvement in handling, battery life, comfort and other aspects, while at the procurement and R & D level, the modular platform improves the sharing rate of parts and components, saves the verification cycle of the underlying functional module, thereby reducing R & D costs and accelerating product innovation.
For example, in just one year, Volkswagen has released three cars based on MEB, ID.3, ID.4 and ID.6, and this month, Volkswagen also announced the opening of overseas pre-sales of ID.5, which is not fast, and Krypton, which is based on the SEA architecture, also announced the launch of no less than two new cars every year.
The driving level has brought about an upgrade of the experience. Oil to electricity and fuel vehicles, the software level is subject to the traditional electrical and electronic architecture (EEA), there is no way to achieve OTA (online function upgrade), the loaded screen is a chicken rib, computing power and transmission speed without experience.
The pure electric platform makes driving a pleasure due to the combination of stronger chips and algorithms.
If the fuel car is compared to a Nokia that can only call and text, then the current smart electric car can be compared to the original iPhone.
But Geely's movement in pure electric architecture and hybrid system is slightly slow. It starts with the transition from oil to electricity. It should be noted that this transition is a common measure in the process of new energy transformation.
Because the development of a pure electric platform architecture from scratch is time-consuming and costly, and the launch is full of uncertainty in the face of immature markets and technologies. Volkswagen Pure Electric Golf, Langyi and Bora are all similar products.
Over time, such an operation will inevitably make consumers feel that it is a ghost behavior, because the oil to electricity is usually to pull out the engine, gearbox and mechanical transmission parts in the fuel vehicle, and then stuff the battery pack, motor and other parts into it;
The result of this "stealing beams and changing columns" is that the product has to be discounted in terms of space layout, mileage, sports performance, safety, and OTA at the software level.
Don't look at geely's launch of the electric brand geometry when the momentum is huge, the press conference opened to Singapore, said to seize the new energy and electrification, but then the two oil to electricity products let consumers call out is Li ghost behavior.
At the beginning of 2020, the Ningbo base spread the saying that in the group's 2019 performance appraisal, the geometric sales team ranked first from the bottom.
By the time Geely finally introduced its pure-electric architecture and hybrid system, several rivals were already one step ahead.
For example, in the first ten months of this year, the Euler brand based on the Great Wall pure electric ME platform has sold 98,000 vehicles, which is 1.5 times that of Geely, contributing a large number of positive points.
In addition, BYD released the DMi super hybrid system and three new cars in January this year, which basically achieved the same level of fuel vehicle parity, and sales climbed steadily.
Behind the speed of transformation, there are many factors involved, such as the determination of management, the maturity of technology, and the company's consideration of timing and strategy.
Moreover, as far as the pure electric architecture itself is concerned, there are characteristics of long research and development cycles and huge investment.
In early 2019, Audi and Porsche engineers dismantled the Model 3 in detail, surprised by Tesla's ability to control costs, and decided to postpone the release of the high-end pure electric platform PPE.
But in terms of what everyone recognizes to do, Geely is slower than others, so the cold eyes of the capital market are naturally expected.
Specific to Geely's approach, it invested 4 years and 18 billion yuan in R&D of the SEA structure, exceeding the total R&D investment of Geely Automobile in 2018, 2019 and 2020. Therefore, diluting the cost becomes particularly important, after all, it does not have the scale advantage of selling tens of millions of vehicles a year like Volkswagen.
Geely's approach is to let as many of its brands use the SEA architecture as much as possible, including Extreme Kr, Geometry, Volvo, Lynk & Co, Smart, etc., and also use THE technical advantages of SEA and the Ningbo Hangzhou Bay factory to provide technical support or FOUNDC services for other brands, including Baidu, Foxconn, FF, etc.
But until the large-scale launch of PRODUCTs based on the SEA architecture will not be until at least 2023, and before that, the recent trend of Geely's stock price will be determined by whether it can seize a new round of product cycles.
Transition period to be assessed
At present, Geely is at the beginning of a new round of product cycles.
From 2020 onwards, Geely's old platform has gradually been eliminated, and architectures such as CMA, BMA, and SEA have gradually developed, and Geely's "modularity" degree has increased significantly compared with before.
In the process of automobile production, it is often necessary to go through the process from single-model development to platform production to modular production. In this process, the versatility of parts and engineering continues to increase.
Compared with platform production, the advantage of modularity is that it can cover different levels of models, a higher proportion of parts sharing and higher production efficiency, so many car companies have introduced similar architectures.
For example, Volkswagen's MQB and MEB, BYD's E platform, Great Wall Motor's lemon, GAC's GEP and so on.
Taking Volkswagen as an example, automobile manufacturing is moving from platforming to modularization. Image source: Essence Securities
Before 2006, the fledgling Geely took the road of single-model development, mainly relying on assembly line production and cheap labor to reduce costs, without a platform concept.
From 2006 to 2015, the platform has achieved results, and classic models such as King Kong, Vision, Panda, and Emgrand correspond to production platforms such as FE, NL and KC.
However, at this stage, because there are many and miscellaneous products, and the positioning of each other is not clear enough, the internal competition is serious, and the competitive advantage is not prominent.
From 2016 to 2020, after the acquisition of Volvo, Geely significantly improved its technical strength through continuous absorption and learning, and began to enter the 3.0 era with modularity as the main feature.
The modular platform includes CMA in cooperation with Volvo, as well as BMA developed in-house, including the Lynk & Co series, Binrui, Binyue, ICON and so on.
The CMA architecture can cover A to B-class vehicles, supporting traditional energy and new energy power systems, covering brands such as Geely, Lynk & Co, Volvo and Polestar, while the CMA and BMA architecture can reach up to 86% and 70% of the parts, respectively, and the research and development cost is more than 20% lower than that of the traditional platform.
Although Geely has gone further and further down the road of modularization, until last year, geely's sales structure was mostly based on models built on the old platform.
In 2020, Emgrand (including cars and SUVs) sold about 350,000 vehicles, Boyue sold less than 250,000 vehicles, and the Vision series sold about 190,000 vehicles, accounting for more than 60% of the total sales, which is why the average price of Geely bicycles has increased slowly in the past two years and the gross profit margin has declined.
Since last year, Geely's main products have begun to be replaced, replaced by products based on architecture, whether it is performance or price are up a step higher than in the past.
In November last year, the first Geely sedan, Xingrui, built based on the CMA structure, was listed at 113,700-149,700, which was one level higher than Emgrand and Binrui, and until now the monthly sales have remained stable at more than 10,000 units.
Since the beginning of this year, Geely has launched Emgrand based on the BMA architecture, as well as the CMA architecture based on the Star Yue L, especially the latter, priced at 137,200 yuan, the price is 50% higher than the previous best-selling Bo, and the sales volume exceeded 10,000 for two consecutive months after the listing, far exceeding the first generation of Star Etsu launched in 2019.
However, since Geely is currently in the transition period of product shifting, the results may not appear until a while later.
According to the information revealed at the investor exchange meeting in October last year, due to the limited proportion of CMA models, the generalization rate of Geely auto parts is only about 30%, but with the gradual development of CMA, SEA, BMA and other structures, the generalization rate of parts will increase to more than 60% in 2-3 years in the future.
But the hybrid and SEA architectures are far from quenching the near thirst. In the context of the global lack of cores, perhaps the most important thing for Geely at present is to work the target of 1.53 million vehicles to use scale to dilute costs.
End
Today's automotive industry, new forces have become the fat in the eyes of capital, the focus of public opinion, this month's listed Rivian in the case of only 336 vehicles successfully IPO, and successfully raised 12 billion US dollars, the market value exceeded Ford and GM, the traditional automakers in a capital feast seems to have become a spectator.
But the electrification transformation of the automotive industry is not a 100-meter race, but a marathon.
The new forces are temporarily rushing ahead because of the lack of historical baggage and financial boosting, in contrast, the traditional car companies are slightly sluggish, but this does not mean that this backward situation will continue;
Because in the automotive industry, some things don't change with the emergence of new companies, new technologies, and new models, such as scale and customer experience.
In this tide of history, opportunities and challenges are equal.
Resources:
[1] Geely New Energy let go, what are the odds? Finance National Weekly
[2] Santana is mired in rumors of suspension of production And is fined $2,000 per vehicle produced, The Economic Observer
[3] Sufficient charge, into a strong product cycle, Ping An Securities
[4] Ten-year Outlook I: The valuation system of the automotive industry is undergoing changes, and CICC is the highlight
[5] At 2600 to 2900 yuan per minute, China Automobile Data released the mainstream price prediction of the 2021 points transaction, China Automotive News Network
[6] Bottom charge, regroup and start again, Soochow Securities
[7] The 4.0 era opened a strong cycle, and the advantages of modular architecture were outstanding, guosen securities
[8] After dismantling the Model 3, Audi Porsche silently modified its new platform, Tencent Technology
*Author Luo Songsong, Editor Zhou Zhehao
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